Plaintiffs v Defendant

2 On 2 October 2007, the defendant ('Proline') made application for the winding up of the first plaintiff ('Griffith & Beerens') in the Court.

3 On 2 November 2007, the plaintiffs commenced this debt recovery proceeding by writ. They claim monies allegedly owed for goods sold and delivered to Proline.

4 In its 12 December 2007 defence and counter-claim, Proline denies that debt and alleges that the plaintiffs owe it monies by way of commission on goods sold.

5 On 20 December 2007, the Master (as his Honour then was) struck out the winding up application on the basis that Griffith & Beerens would deposit the amount the subject of Proline's statutory demand in a trust account jointly held by the parties' solicitors. The Master concluded that Proline had failed to rebut the presumption of solvency. Griffiths & Beerens sought costs, arguing that the winding up application had been an abuse of process. There was a three day hearing on the abuse of process issue between 5 and 7 August 2008.

6 On 23 December 2008, the Associate Justice handed down his reasons for deciding that he would make no order as to costs even though there had been an abuse of process.

7 Griffiths & Beerens argues that the debt proceeding should be referred to the same Associate Justice because his Honour is acquainted with the many documents canvassed in the winding up proceeding and has heard relevant evidence over a three day period. It argues that it would be costly and inefficient for the matter to be ventilated in the Court before another judicial officer and refers to the risk of inconsistent findings.

8 Proline resists the application, arguing that it would have a justifiable sense that there had been a pre-judgment in relation to significant matters if the Associate Justice were to hear the case. The submission is put on the basis that a fair-minded lay observer would have a reasonable apprehension of bias by pre-judgment in the circumstances.

9 Proline cites the Associate Justice's various statements of his conclusion to the effect that Griffiths & Beerens did not owe any commission and his implicit findings as to the credit of witnesses.

10 Counsel for Proline relies upon Mahoney JA's statement of the 'pre-judgment principle' in Australian National Industries Ltd v Spedley Securities Ltd:[1]

...the judge must determine the case before him upon the basis of the material placed before him in the case and by his appreciation of that evidence, including the witnesses and the evidence they have given, in the instant case. One of the forms of pre-judgment - there are, of course, others - is determining a matter in a particular way because, in another case, the judge has decided the same or a similar matter in the same way.

11 In Spedley, Mahoney JA held that the court is required to address the issue not only as to whether there is pre-judgment in fact, but also whether there will be the appearance that it has occurred, creating an apprehension of partiality.[2] His Honour stated the four propositions which he considered to have emerged from the High Court's decision in Livesey v New South Wales Bar Association[3] and succeeding cases, as follows:

(a) the disqualification of a judge for apprehended pre-judgment depends on form rather than substance;

(b) whether there is an unacceptable appearance of pre-judgment is to be decided, not according to likelihood, but according to possibility;

(c) it is to be judged, not according to what the court and the parties know, but according to the impressions of a lay person who does not know the facts; and

(d) there will be an unacceptable appearance of pre-judgment if the judge has previously dealt with the issue of fact or credibility which is before him in the instant case.

12 The New South Wales Court of Criminal Appeal declined to follow the Spedley decision in R v Masters; R v Richards; R v Wunderlich[4] in a criminal case in relation to the question of apprehended bias on the part of a trial judge who had heard a pre-trial application. The court, relevantly, distinguished the decision in Spedley on the basis that:

[i]t was concerned with the situation where the judge was to hear a different (albeit, related) action in which there arose the same issue of fact and the credit of the same witness which he had already decided against one party.[5]

13 The issue was considered by the Court of Appeal in Gascor v Elliot.[6] There, Ormiston JA cited Mason CJ and McHugh J's statement of the relevant test as to allegations of bias in Webb v R:[7]

... this court has held that the proper test is whether fair-minded people might reasonably apprehend or suspect that the judge has pre-judged or might pre-judge the case ... the principle behind the reasonable apprehension or suspicion test is that it is of 'fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done'.

14 Ormiston JA pointed out that the court's view of the significance of the relevant factual determinations will determine whether it will find that there would be a reasonable apprehension of bias.[8]

15 I note that in Rustom v Ismail,[9] Cavanough J very recently considered the authorities and applied the Livesey principle, setting aside a tribunal's decision on the grounds of apprehended bias. In Rustom, the tribunal had made previous findings as to the credit of witnesses when their credibility was 'of great significance' in a relation to a subsequent claim.

16 Proline maintains that this case is not one falling within the exception to the principle because it is necessary for the Associate Justice to sit or the case is 'extraordinary' or one which involves 'special circumstances' justifying the referral.

17 The Associate Justice referred to evidence under cross-examination from Proline's director, Mr Kua Si Lin, its Company Manager, Ms Lai Kim Foong and Griffiths & Beerens' General Manager and former employee, Mr Nicholas John Loschiavo.

18 His Honour noted Mr Lin's evidence that commission payments, made to him and used for his own personal expenses and those of his children, belonged to Proline. He referred to the affidavit sworn by Ms Foong in support of the statutory demand relating to the alleged debt to Proline.

19 The Associate Justice concluded that, on the documentary evidence, only $4,764 would have been payable as commission to Proline and that sum would be off-set, with the result that no debt was due then or when the application was brought.[10] His Honour went on to find that it could not be said that commission was payable to Proline[11] and that it was clear that the company was not a creditor at the time of the demand.[12]

20 The Associate Justice also found that Proline had made the winding up application in order to stifle Griffith & Beerens' proceeding in the Court against Mr Lin's close friend, Mr Paul Duggan, and others. His Honour said:

The evidence given in cross-examination by Mr Lin did not adequately explain why Mr Lin chose to bring a demand particularly when it is clear that Proline was not a creditor. Evidence was also provided that Proline contacted creditors of Griffiths & Beerens and requested they support Proline in its application to wind up Griffiths & Beerens. The only conclusion that can be reached is that Mr Kua Si Lin was intent to support Mr Duggan and to stultify or delay the other proceeding particularly when no debt was due.[13]

21 The Associate Justice concluded that, therefore, there had been an abuse of process on the basis of the well known principle in Williams v Spautz.[14]

22 It would appear that his Honour may have accepted evidence from Mr Thomas Beerens, a director of Griffiths & Beerens that Mr Lin had informed him that he was obliged to support Paul Duggan who was like his brother.

23 Significantly, the applicant seeks a discretionary order referring the matter to the Associate Justice in the interests of the efficient disposition of the proceeding and of limiting costs.

24 This is not a case in which any decision on the part of the Associate Justice is being challenged on the basis of pre-judgment. The arguments relating to the issue of the appropriateness of the referral sought have not been aired before his Honour and he has not considered whether or not he should conduct the trial.

25 I am not persuaded that the order should be made.

26 I agree with counsel for Proline that an ordinary layperson who was a litigant might reasonably fear that the Associate Justice might possibly have pre-judged the very significant issue in the debt recovery proceeding as to whether there was commission owing to Proline by Griffiths & Beerens.

27 Such an ordinary litigant might also reasonably think that the Associate Justice had implicitly accepted Mr Beerens' evidence about Mr Lin's statements concerning Mr Duggan and had rejected the Proline witnesses' evidence to the effect that the company was owed commission by Griffiths & Beerens. This might reasonably be taken to have involved implicit findings as to the credit of the Proline witnesses.

28 The volume of materials before the Associate Justice was considerable and the hearing took place over three days. Nevertheless, I am not persuaded that this makes it necessary for him to hear the debt proceeding. The case is not extraordinary nor are the circumstances exceptional warranting the referral sought.

[1] (1992) 26 NSWLR 411, 437 ('Spedley').

[2] (1992) 26 NSWLR 411 (436).

[3] [1983] HCA 17; (1983) 151 CLR 288 ('Livesey').

[4] (1992) 26 NSWLR 450.

[5] (1992) 26 NSWLR 450, 472 (Hunt CJ at CL, Allen and Badgery-Parker JJ).

[6] [1997] 1 VR 332.

[7] [1994] HCA 30; (1994) 181 CLR 41, 47.

[8] [1997] 1 VR 332, 348.

[9] [2009] VSC 625, [24]-[26] ('Rustom').

[14] [1992] HCA 34; (1992) 174 CLR 509, 523 (Mason CJ, Dawson, Toohey and McHugh JJ).